The credit card industry's consolidation advanced a step on Tuesday as Associates First Capital Corp. agreed to buy KeyCorp's $1.3 billion credit card portfolio for one of the richer premiums in such deals this year.

The deal highlights Associates' desire to expand its bank card business through agent bank relationships, and would ratchet the company a notch higher in the card portfolio rankings, to 13th-largest MasterCard and Visa issuer, with about $7 billion of receivables. Including private-label programs, Associates now controls some $11 billion in receivables. The sale also fulfills KeyCorp's pledge to quit the business.

Associates, the largest nonbank financial services company in the country, said it will acquire nearly 600,000 MasterCard and Visa accounts. Analysts said Associates is paying a 25% premium, well above this year's average of 16.4%. KeyCorp, the second-largest bank based in Ohio, with $83 billion in assets, said it expects its gain on the sale to be about $330 million.

Industry experts said the price of the deal might entice other banks with portfolios similar to KeyCorp's to sell their card businesses. Industry sources said at least three more deals would be announced either this week or in the first part of January.

"At 25%, other issuers that have strong relationship portfolios will certainly take note," said Jerry Craft, president of Inficorp, a consulting firm in Atlanta. "That's a strong premium."

Beyond providing a sizable gain, the deal solves a problem for Cleveland-based KeyCorp, which has been looking for a buyer for its credit card business since October.

"We haven't been a major force in the card business for several years," said John Fuller, a KeyCorp spokesman. "You have to have a large base of accounts to be able to grow the business and sustain it, and like a number of others, we've reached the conclusion that we could put our assets to other businesses."

As part of the deal, which is expected to close by the end of January, Associates will assume control of the KeyCorp credit card facility in Toledo, Ohio, and retain the 300 employees who work there. Associates said it would keep the KeyCorp name and logo on the card accounts.

"KeyCorp's marquee brand is an ideal fit with our strategy of building our agent bank business," said Keith W. Hughes, chairman and chief executive officer of Associates in Irving, Tex. "This agreement will enable us to market credit cards and related services to KeyCorp's customers."

Analysts said the high premium Associates is paying for the portfolio could be justified by the quality of the accounts and the chance to cross-sell additional products to KeyCorp's customers.

"Associates offers a broad array of consumer financial services that are going to be cross-sold under the KeyCorp name to its core customer base," said Darrell Hendrix, vice president of research at Friedman, Billings & Ramsey in Arlington, Va. "The 25% premium is on the high end of the range, but Associates has a lot of added value that they bring to the table."

For example, Associates will be able to market its college student credit card to KeyCorp's student loan customers, Mr. Hendrix said.

"Our alliance with The Associates is targeted on enhancing customer value," said Robert W. Gillespie, chairman and chief executive officer at KeyCorp, in a statement. "We sought and have found in The Associates an ideal partner who can provide our clients with the superior service they expect and the choices they want through an outstanding array of credit card products."

The Nilson Report, an industry newsletter based in Oxnard, Calif., ranked KeyCorp as the 24th-largest MasterCard and Visa issuer in the United States.

David Robertson, president of The Nilson Report, said the deal is a sign that Associates wants to expand its business in the prime bank card segment. Historically, Associates has served the "un-prime market," Mr. Robertson said.

"You've got Associates, which is flush and wanting to expand its distribution channel. It wants to be in the bank card business for the long run," he said. "It gets access to KeyCorp customers and sees that as an important way to grow."

Associates said the sale is a continuation of its strategy to grow through agent bank relationships. It established a similar relationship with Washington Mutual Inc. of Seattle, last December.

Robert K. Hammer, an investment banker in Thousand Oaks, Calif., who brokers credit card deals, said prices are at historic highs.

The price is "often driven by credit quality and supply and demand," Mr. Hammer said. "In this case, it's a high quality file, and there is not much supply out there."

Associates' management team is considered conservative when it comes to acquisitions.

"They are good tough negotiators, but very fair," Mr. Hammer said. "I'm sure what they paid was worth it in their model."

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